Procurement Regulations protect us against incompetent (or worse) Councillors

There was an outburst recently from the UK body that represents councils – the Local Government Association (LGA) - about the way EU procurement rules are stopping local authorities from saving lots of money. It seemed strangely timed, as the consultation on revising EU regulations finished some time ago, so we can probably assume there was some political thinking behind it.

Peter Fleming, chairman of the LGA Improvement Board, said: “Ridiculous EU procurement rules are making it harder for councils to save money by sharing services, and opportunities to promote local jobs and economic growth are being missed.

“We desperately need the government to take the fight to Brussels on our behalf and promote a re-write of the rules which are stifling public service innovation and limiting councils’ ability to promote growth in their area.”

I didn't really understand his proposition. He gave examples of the success local authorities have delivered in terms of awarding contracts to small suppliers:

Councils also spend 49 per cent of procurement budgets with small to medium-sized businesses, compared to central government which spends less than 14 per cent with SMEs..”

He also boasted of the successful shared services in local authorities (note he didn't mention Southwest One). In which case, what is the problem with the EU Regs? They don't seem to be holding back performance too much, given all these successes, so what is it he wants to do, that he can't at the moment?

The answer seems to be – forget the EU regulations and give more work to “local” suppliers. And that's what worries me. Does he want the same sort of freedom that council leaders have to waste taxpayers money in non-procurement areas? In his own County of Kent, the Council Leader got rid of the  Chief Executive recently after less than 18 months in the job, and for reasons that still aren't clear, gave her a payoff of half a million pounds. Far more than any statutory entitlement to redundancy. No EU rules there, so plenty of scope for councillors to use their entrepreneurial talents, and show us how well they can manage our money, eh?

Of course, some councillors (not Mr Fleming, I’m sure) would love to give work more easily to great local firms – particularly those who just coincidentally happen to be owned by their friends or relatives. Or whose owner  supports the council politically. Or who promise all sorts of wonderful local regeneration, employment of disadvantaged kids, and support for the rain forests. Then disappear with the council's money...

If you read Private Eye you will know that local government features regularly in terms of interesting stories about fraud, corruption and incompetent financial management.  It's not political party specific, and covers both officials and councillors. Now it isn’t endemic by any means, and there is a lot of good practice in local authorities as well.

But personally I feel happier knowing that the EU regulations do define some constraints. Because that gives professional procurement people every now and again the ability to tell their bosses, or elected councillors, "no, you just can't do that"!

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Voices (8)

  1. On the Sidelines:

    What can I say? Hear hear!!The fradulent machinations of councillors and senior officers in many local authorities begger belief – it makes MPs look like naughty little boys.

  2. Dave Orr:

    This is exactly how IBM/SW1 started out: Is another IBM & Southwest One expensive fiasco coming to Police services in Bedfordshire, Cambridgeshire & Hertforshire (as well as prime contractor of G4S Lincolnshire Police)?

    Are their perils in EU Framework Contracts offering a quick way around a full blown EU tender? Peter: Do they expire after 4 years?

    “Following a brief ‘wobble’, the three forces now appear to have recognised that G4S Policing Support Services is a distinct and separate entity to the tainted part of the company associated with the Olympics security bid.”

    A full blown EU tender takes an expensive & resourceful 2-3 years and Beds, Cambs and Herts Police need to make savings by 2014/15, so they short-cutted the Treasury Five Case procurement model and scurried for the nearest EU pre-tendered deal at Lincs with G4S via the framework agreement.

    At Lincs, the G4S contract is yet again predicated on an unproven Police-specific configuration of an expensive ERP IT system – this time Oracle not SAP.

    G4S have simply taken on a prime contractor role and sub-contracted to Cap Gemini for the ERP (sub-contracting & supply chain management was not an issue at the Olympics then?). An expensive model as multiple profit margins down the supply chain.

    Why don’t Beds, Cambs & Herts Police services simply in-source Cap Gemini directly and maintain control & flexibility? Or would the senior management prefer to outsource a challenging situation and then they can simply blame G4S if the savings fail to materialise?

    Like Somerset County Council with IBM and SW1, undoubtedly G4S will write the Business Case for the client! It will be glowing & recommend joining, even though the ERP IT system at Lincs by G4S is not implemented & proven!!

    In Somerset, IBM and Southwest One, after over 4 years into the 10-year contract, missed savings targets of £50m by 80% and have saved just £10m after charging the highest bid price of £254m and SAP/transformation being charged at an eye watering £61m (all three public partners incl Avon & Somerset Police).

    At least IBM had the common sense to keep all the margins to themselves and only sub-contracted the SAP ERP IT to their own IT subsidiary in Bangalore, India.

    Then IBM avoided tax on profits made in the UK (not apparently in SW1 as latest results show £3m-£9m losses for 2011). Is SW1 run as a “loss leader” for profits write down in other parts of IBM?

    “How IBM manages to pay just 7 per cent tax”

  3. Odd Wellingtons:

    Having known a few councillors, and witnessed their fact finding missions to Barbados, for – I kid you not – advice on waste management at our expense. And the trips to the local Masonic lodge to “network” with their brothers I would say keep the rules. It may be imperfect, but is the only protection we currently have..

  4. Dan:

    Ring-fencing work for local companies is a bad idea for a number of reasons.

    1. It becomes a zero-sum game. Companies get more custom from their local authority, but less from other areas of the country. The potential growth of these companies is jeopardised for no net benefit for the local community.

    2. No-one has yet decided what ‘local’ actually means. Is it City-wide? County-wide? Region? England? And what is a local company? Is it one with the head office within the area, or will a branch office do?

    3. Value for money is harder to obtain, as companies know they face more limited competition. There is also a risk that companies become reliant on the custom of their local authority which puts them at risk of financial failure.

    And thats just assuming they still run some sort of competition amongst local suppliers. If they just award contracts directly, then God help us…

    1. Final Furlong:

      There needs to be a meeting of minds on this.

      Throw away all EU Procurement Regulations – replace them with first-class procurement processes and sound (transparent, local) governance.

      Make sure nominated local citizens sit on all ‘procurement panels’ for all contracts above a specific threshold. They should also set the criteria.

      Sounds like they (Peter Fleming et al) simply don’t know what good looks like.

      Anyway, procurement is a breeze when compared to housing and new builds. So many ‘new builds’ are influenced by mates of the local Councillors who are so often conflicted.

      Also, it’s much worse in France, and don’t even mention Italy….

      1. Sam Unkim:

        Aaaahhh Throwing away all EU Procurement Regulations
        Probably the dream of every purchasing professional.

        The biggest obstacle being that that a “common market” was the foundation of the European Union and possibly a fallback position when the Euro implodes (Next April ?) wth all the rhetoric and rioting which will follow.

        Perhaps its better to be communicating, through some laborious tendering rules, than each country becoming its own trading block again

        1. Dan:

          As I’ve said on here before, the rules themselves aren’t the problem. Its the overly-harsh consequences of non-compliance and the constant stream of case law inducing the mind numbing fear of making a mistake thats the problem. Until a court categorically says “yes, you can do that”, public procurers will almost always err on the side of caution.

          In March the EU Commission lost a case that had been brought against it because the judge interpreted the law in a different way to the Commission. When the people that wrote the rules are inadvertently falling foul of them, what chance do the rest of us have?

          1. bitter and twisted:

            I disagree – the problem is that the rules are there for the benefit of suppliers, not taxpayers.

            Fairness to suppliers is a means to the end of good value for money for taxpayers, not an end in itself.

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